Nordic central banks emphasize digital payment security

Speakers at the opening the second Nordic Cyber in Finance conference in Helsinki. Photo Source : Bank of Finland.

Nordic central banks on Thursday underlined the risk of breakdown on the digital payment systems, urging the regulators and commercial bankers to do more for cyber security.

Opening the second Nordic Cyber in Finance conference in Helsinki, Marja Nykänen, deputy governor of the Bank of Finland, warned of the reluctance of the basically profit-oriented commercial financial organizations to invest in security.

She said, while the previous world financial crisis could be attributed to financial risk taking, the next could originate in mistakes in the cyber sphere.

Nykänen said it is important that the commercial finance sector understands its role not only in providing financial services, but also that it has this very connecting position in societies.

Jan Nicolaisen, deputy governor of the Norwegian Central Bank, underlined that the risks have to be combated in a cost efficient manner.

He said the whole financial sector shares the interest to fight the threats. "No financial organization can survive a successful attack. The choice between risk and cost must be made in the Board Room."

Martin Floden, deputy governor of the Swedish Central Bank, said his organization has been a bit naive in focusing on efficiency in recent decades, and will have to concentrate more on safety now.

The central bank directors also tackled the situation where currency issued by the central bank has increasingly ended up in a secondary role as payments have been digitized.

Floden said the change has been rapid in Sweden and the cash infrastructure is no longer well functioning. One option is that central bank would issue its own digital currency.

"All payments are digital in Sweden. It is not central bank currency, but money from commercial banks." Taking a step back and making a better role for cash would be difficult to put in practice as people are used to digital payments. "So we think of central bank digital currency, but there is no answer yet," he said.

Meanwhile, Nykänen asked whether central banks will actually increase risks if they start issuing digital money. Nykänen explained that in Finland the establishment of a contingency payment system on a voluntary basis turned out to be difficult and now legislation is being prepared.

Jukka Savolainen, a director for vulnerability and resilience issues at the newly established center on hybrid threats in Helsinki, said a situation where people cannot purchase food or medicine can be dangerous.

He declared he is a supporter for keeping bank notes available. Companies could survive longer with payment problems, but for people three days may be the maximum, he stressed.

The risks of the increased outsourcing of operations were discussed as well. "You can outsource work, but you cannot outsource your responsibility", Nykänen summed up.

Nicolaisen said the way that "third party operators" are controlled should be reassessed.